Does building green make financial sense? (published in the Santa Barbara News Press in July of 2009)

Green building has gained in popularity over the past few years.  Just about any new building, whether residential, office, or commercial, will have green features, either because they are mandated by the state or federal government, or because they are believed to be cost-saving in the long-run, and good for the environment.  But are they really either of these?

First, we need to understand that while it is possible to have materials, technologies, and methods of construction that are both cost-saving and good for the environment, in many cases this will not be the case.  In other words, many of the things that make a building green—improve the building’s impact on the environment—cost more than the alternative, non-green element. 
While there have been many studies claiming to prove that green building improves energy efficiency for buildings, the vast majority of these (if not all of them) have severe flaws that make their conclusions akin to comparing apples to oranges, and thus, their conclusions are unreliable at best.  Also, the green building movement is relatively new, and many of the green building methods, technologies, and products have not been around long enough for adequate testing in real-world applications to know yet if they truly offer cost savings or even reduce the building’s impact on the environment.  
One study, widely quoted by advocates of green building, conducted by the U.S. Green Building Council (USGBC), uses information from the Energy Information Administration (EIA) for comparing green buildings with “the national building stock average from the 2003 Commercial Building Energy Consumption Survey (CBECS) for all building types.”  (The USGBC is the organization responsible for the LEED (Leadership in Energy and Environmental Design certification process.)  This study claimed that LEED certified buildings save 24 percent when compared with the average “national building stock.”
The EIA survey includes a large sample designed to reflect all buildings in the United States, many of which are quite old. The detail of the study shows that 74 percent of the buildings in the baseline are more than 20 years old, and 59 percent are more than 30 years old. Thus, in the USGBC study, new LEED buildings are being compared to buildings which are, on the whole, quite old.
It is not surprising that new buildings are more energy efficient than old buildings, so it is disingenuous to claim that those energy savings are attributable to LEED certification, as opposed to the simple fact that the buildings are taking advantage of improved energy technology developed in the last forty years.
So does green building make sense from a cost perspective?  The answer may depend on just that; perspective.  If the person, organization, government, developer, etc, that builds a green building is planning to own the building long-term, and if the green elements including in the building’s construction prove to be cost-saving (eventually), then it may make sense for the owner to spend the additional money to build green.  If however, the owner does not plan to own the building long-term, as in the case of a developer planning to sell the building soon after construction is completed, the question of green viability becomes even more complicated. 
Also, there are perspectives with regard to the costs and utility of a building.  For example, one owner might be most concerned with up-front building costs, while another may care more about ongoing operating and maintenance costs, while a third may be focused on how long the building will last, and still another might look at the productivity of workers using the building.
A commercial or residential building with green features may generate higher rents/lease rates due to the tenants’ perceptions that they will save on utilities, or because tenants believe they are helping the environment (whether true or not).  If a green building can demand sustained higher rental/lease rates, the developer may be able to sell the building for incrementally more than the additional cost of the green elements.  Estimates vary widely as to the additional cost, if any, of building green versus traditional, non-green building.   
Many of the most effective green elements are things that don’t necessarily cost money, or at least don’t cost significant money.  Probably the most effective green element of any building is its orientation to the sun.  By positioning the building to avoid solar heating in the summer months, and to take advantage of natural light to reduce electricity usage, the efficiency of a building can be increased dramatically, potentially without adding to the building costs.
According to Mark Schniepp, economist with the California Forecast, another very inexpensive green approach is to simply paint the roof of the building white, or use white or light-colored roofing materials with glass and rubber chards embedded in them that reflect sunlight, thus reducing the heating effects of the sun on the building. 
A large percentage of the total energy usage of buildings (as much as 85 percent) is used to cool and light the building.   By using site planning and orienting the building appropriately to efficiently avoid the heating impact of the sun while maximizing the capture of natural light, a building can dramatically reduce its energy usage.
There are many other elements like high-efficiency/low water usage (low flow) toilets and motion sensor light controls that have short cost recovery periods.  Some other green elements, such as solar panels, have a much longer cost recovery period, even with government subsidies.  Keep in mind as well that government subsidies come out of our collective pocket, so the cost is still there, even if it is absorbed by society and not incurred by the building’s owner.  Without subsidies, it is still unclear as to whether the cost of solar panels can be recouped within their expected economic life. 
As Bruce Allen relates in his recent book, “Reaching the Solar Tipping Point, the cost per watt of power generated for solar panels has decreased to about $0.90 per watt, and is expected to fall to around $0.60 per watt shortly.  As costs come down, the pay-back period shortens, leading to the possibility of a more economically viable green element.
So far I have discussed the economic issues surrounding green building, but there are other considerations.  Protecting the environment is, of course, a key issue and reason for green building.  Many of the so-called green products require chemicals harmful to the environment during the production process, or simply come from so far away from the building site that any energy gains they may offer are dwarfed by the energy burned to get the product to the site.  We must balance any environmental gains a green product offers during its life with the environmental cost or producing and delivering it to determine if the product is a net positive for the environment.
There are other issues to consider as well.  Many green building elements offer cleaner air, improved natural light, a more pleasing working environment and many other quality of life improvements that are difficult to measure, but are nonetheless valuable. 
At the end of the day, we may never get a clear answer to the question of the cost effectiveness of green building.  Green building methods, products, and materials are constantly being introduced and improved, so any measurement of their effectiveness would come well after they have been made obsolete. 
I think, as with any new movement or industry, there will be good and not so good developments.  Ultimately, for those considering a green building project, the costs and benefits of going green must be weighed in the context of their individual perceptions and attitudes.  Whether or not a green building is judged to be a success will not simply hinge on the cost in dollar terms to build the building, or even the cost to the environment, but rather on the long-term utility, enjoyment, and long-term costs of the building, both to build, operate, and maintain throughout its life.  

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